Beijing seems unable to marry its desire both to attract tech companies home and to control domestic markets

The saga to do with Xiaomi’s IPO homecoming has highlighted one peculiar, but rather crucial, feature of the Chinese stock market: It isn’t really a market.

The smartphone maker this week shelved its plan to sell shares in mainland China through depositary receipts—a new mechanism that Beijing has recently introduced to attract Chinese technology companies to list at home. China’s largest tech stocks—such as Alibaba and Tencent—are mostly now listed in New York or Hong Kong.